Going Beyond Direct Store Delivery (DSD)

PACKAGED BEVERAGE Going Beyond Direct Store Delivery (DSD) In the Packaged Beverage category, the bulk of the product comes to your c-store through DSD or Direct Store Delivery. However, there is a significant opportunity to be realized by going beyond DSD to warehouse delivered products. John Roach, our Vice President of Merchandising, says, Warehouse delivered items open up additional opportunities to try new products, enhance key segments and realize higher margins. With Coke and Pepsi as dominant players in DSD, their trucks are typically carrying a limited assortment of the very high-volume items, which deliver an average margin of 35-40%. On the flip side, warehouse delivered items are a great complement to your DSD product, and many times offer the added benefit of margin opportunities that are 45% or greater. With the better-for-you trend continuing, carbonated soft drinks (s), which are delivered through DSD, continue to decline. With that said, all beverage suppliers are promoting non-carbonated beverages such as bottled water, ready-to-drink (RTD) tea and juices to fill gaps created by consumers looking to make healthier choices. This includes Coke, Pepsi, and yes, Eby-Brown. As a whole, the Packaged Beverage category is performing well. In-store sales grew from 14.9% in 2014 to 15.14% in 2015. Average store sales, gross margin and average gross margin dollars per store are all up and trending in a positive direction. With encouraging numbers like these, it s imperative that we take a closer look at the opportunities and products that warehouse delivery offers, and investigate the best way to merchandise them in your store. At Eby-Brown, our warehouse delivery program offers products in every core category and sub-category, and our goal is not to match DSD, but to provide specific products and opportunities that will complement the DSD assortment. Our product offering includes: energy drinks, isotonics (sports drinks), juice/juice drinks, bottled water, RTD tea, RTD coffee and dairy/protein drinks. So let s take a closer look at each segment to get a better idea of the specific product trends. Growth Trend: +5.0% Celsius and V8 two healthy energy drinks that focus on natural ingredients Leading Brands: Monster, Red Bull, Rockstar, NOS is our first segment and it has seen a positive growth trend of 5%. The leading brands are Monster, Red Bull, Rockstar and NOS, but there are other brands that are available through Eby-Brown that offer better-for-you attributes which appeal to consumers who are looking for healthier alternatives. By adding the Celsius and V8 lines, you can effectively attract new consumers to the segment. Within your cooler door space, this segment should occupy roughly of your shelf space. 32 Category Insights

Growth Trend: +2.5% MET-Rx Super Hydration Sports Drink contains 6 key electrolytes sourced naturally from coconut water Leading Brands: Gatorade, Powerade or sports drinks are also showing positive growth at 2.5% with Gatorade and Powerade holding their positions as the top brands. On the warehouse delivery side, Eby-Brown is introducing the new MET-Rx Super Hydration Sports Drinks from US Nutrition, which leverages the brand equity in the related nutrition bar category. The segment should take up of your cooler door space. Juice and juice drinks are our next segment, which is also experiencing positive growth at 4.7%. This segment is divided into four sub-categories: juice, premium juice, premium juice smoothies and kids juice drinks. It s important to note that Eby-Brown offers brands such as V8, Tropicana, Simply, Tropicana Pure Premium and Naked Juice, as well as the leading kids drinks with Bug Juice and Good2Grow. These are all part of the better-for-you trend that customers are looking for. Overall, this segment should occupy 8.9% of your cooler door space. Growth Trend: +4.7% SUBCATEGORY: Juice V8, V8 Splash, V8 Fusion the power of the V8 brand for the whole family Leading Brands: Minute Maid, Lipton, Ocean Spray, Sunny D SUBCATEGORY: Premium Juice Simply and Tropicana Pure Premium two powerhouse brands with products that are pure and natural Leading Brands: Orchard Pure, Florida s Natural SUBCATEGORY: Premium Juice Smoothies Naked Juice, Bolthouse Farms and Odwalla the three leading brands in this growing segment DSD is still the dominant source for cold vault products, but there s a lot of opportunity beyond DSD to enhance your margins and keep you on trend with customers. Warehouse products allow you to take advantage of new items and emerging trends, all while delivering greater margins and more profit. John Roach Vice President Merchandising, Packaged Beverage SUBCATEGORY: Kids Juice Drinks Bug Juice and Good2Grow the two most popular brands with kids Leading Brands: Tum-E Yummies, Fruit Shoot Category Insights 33

PACKAGED BEVERAGE Growth Trend: +3.4% SUBCATEGORY: Premium Waiakea Hawaiian Volcanic naturally high in minerals, electrolytes and alkalinity Leading Brands: Fiji, Voss SUBCATEGORY: Enhanced AQUAhydrate elevated alkalinity and enhanced with electrolytes Leading Brands: Smart, Vitamin, Propel SUBCATEGORY: Sparkling Perrier and LaCroix these leading brands are both sugar and calorie free SUBCATEGORY: Spring Ice Mountain and Deer Park the leading spring water brands in their respective regions SUBCATEGORY: Purified Nestle Pure Life a great brand at a great value Leading Brands: Aquafina, Dasani Bottled water is another segment that can be broken down into multiple sub-categories: purified water, spring water, premium water, sparkling water and enhanced water. As a whole, this segment is up 3.4% and should occupy 13% of your cooler door space. On the warehouse delivery side, Nestle Pure Life is the top selling purified water, while the regional brands from Nestle s, Ice Mountain and Deer Park, are the leading Spring brands. Eby-Brown also carries waters that offer ontrend and margin advantages such as Evian in the Premium segment, LaCroix, a leading brand in Sparkling, and AQUAhydrate, a new Enhanced. A segment that s popular and is growing right now is RTD tea, up 2.1%. This will occupy only of your door space, but again, these are hot items currently and are a great opportunity for you to make significant margins. Within this segment, there are multiple pricing levels. On the Eby side, the more value oriented brands such as Nestea and Xing Tea, are coupled with Premium lines from Argo Tea, POM, Steaz and Sweet Leaf. The Xing Tea line, with its 23.5oz cans, is comparable to the Arizona Tea line, but is not pre-priced, which offers greater margin potential. Also, brands such as Steaz and Sweet Leaf offer consumers an organic alternative, playing to that betterfor-you need that customers are looking for. Growth Trend: +2.1% SUBCATEGORY: Tea Nestea, Tradewinds and Xing Tea a trusted entry level brand, a step-up slow brewed tea and a popular assortment that is comparable to Arizona Leading Brands: Lipton, Arizona, Gold Peak, Snapple SUBCATEGORY: Premium Tea Argo, POM, Steaz and Sweet Leaf a terrific collection of unique blends and organic options for consumers who want the best Leading Brands: Pure Leaf, Honest 34 Category Insights

If you trim dairy down too much, you ve just lost a destination opportunity as it relates to gallons, half gallons and quarts. John Roach - Vice President Merchandising, Packaged Beverage RTD COFFEE Growth Trend: +9.8% Caribou Iced Coffee, Stok Cold Brew, Shamrock Farms Cold Brew & Milk and LaColombe Draft Latte great new products that are on the leading edge of a growing segment Leading Brands: Starbucks, Java Monster RTD coffee is a segment that s growing at an impressive 9.8%. Of course, the industry leader is Starbucks, and Coke has entered this segment with Java Monster, but if you re looking for complementary products to deliver higher margins, Eby is introducing four new product lines that address current consumer trends. Caribou Iced Coffee from Dean Foods offers strong brand recognition and extended shelf life. Stok Cold Brew Coffee is positioned to be the first national branded cold brew product, and poised to emerge as the #1 line in the hot Cold Brew segment. The new Shamrock Farms Cold Brew Coffee & Milk takes it a step further by pairing its quality milk with the on-trend cold brew taste consumers are craving. The innovation was driven by consumer insight that an overwhelming amount of cold brew drinkers prefer the taste when the cold brew coffee is combined with milk. And finally, there is the new line from La Colombe, the first-ever Draft Latte, now in a convenient can. Experience the full taste and texture of a true iced latte, complete with a frothy layer of silky foam. Draft Latte is made with real ingredients like nutrient-rich milk and cold-pressed espresso. It s naturally sweet with no sugar added. Be sure this segment occupies of your cooler door space. DAIRY/ PROTEIN Growth Trend: -0.4% Shamrock Farms Rockin Refuel Milk Beverage, MET-Rx High Protein Milk Shakes, Power Bar Protein Shakes, Fairlife Ultra-Filtered Milk, Oikos Greek Yogurt Drinks and Chobani Drinks a full assortment to maximize your opportunity in a critical segment Leading Brands: Muscle Milk, Core Power Our last segment is the dairy/protein drink segment and it s a little different than the others. With a very slight dip of -0.4%, this segment has suffered as a result of a decline in the take-home or pantry fill-in portion of the business. Similar to some Household and Grocery category items, take-home sizes of milk have been minimized in the cooler in favor of grab-and-go items. Roach tells us that DSD service in this category has not been consistent, resulting in lost sales and lost profit for some c-stores. To combat this issue, Eby-Brown will now be offering a complete, fresh milk program. This program is a partnership with Dean Foods and will offer gallons, half gallons, quarts and pints under the DairyPure and TruMoo brands. DairyPure is the only national brand of white milk, and is the leader in the category, while TruMoo is the leading brand of flavored milk. In addition, these brands also offer extended shelf life (ESL) products in the half gallon and pint sizes, which can mitigate risk for lower volume stores where spoilage is a concern. It s important to note that protein drinks such as Muscle Milk and Core Power are also a part of this segment, and on the Eby-Brown side, we offer Shamrock Farms Rockin Refuel Protein Milk Beverage and MET-Rx High Protein Milk Shakes, as well as new Greek yogurt drinks from Chobani and Oikos to fill your customers needs. Overall, your dairy/ protein drink segment should occupy 6% of your cooler door space. Category Insights 35

PACKAGED BEVERAGE Once you ve chosen your products and are ready to set up your cooler door spacing, it s important to note the volume/space percentages we outlined for each segment. In addition, you should block by segment type, paying particular attention to how consumers shop. Depending upon the space available in your c-store, we offer very detailed space allocation recommendations for 6-door, 8-door, 10-door and 12-door configurations. Each configuration provides information about space percentages, number of shelves to allocate per segment, number of shelves per door and total number of facings. Your Eby-Brown representative will be happy to assist you with your cold vault planning and allocation. Just remember success in Packaged Beverage will mean going beyond DSD to find the complementary warehouse delivered items that will satisfy your customers needs and bring greater margins and profits for you! Sources: IRI: Cold Vault Space Allocation; EBY Space Allocation Diagram; Dean Foods Conversation; ); J. Roach, personal communication, Feb. 6, 2017. Space Allocation Recommendations 6 DOOR # OF SHELVES CATEGORY % SHARE Juice/Juice Drinks 8.9% Dairy/Protein 6.0% TOTAL SALES 100% 11.7 10.9 4.0 3.7 5.5 2.2 1.5 2.5 42 82 77 28 26 38 15 10 18 294 10 DOOR # OF SHELVES CATEGORY Juice/Juice Drinks Dairy/Protein TOTAL SALES % SHARE 8.9% 6.0% 100% 19.5 18.2 6.6 6.2 9.1 3.6 2.4 4.2 70 137 128 47 43 64 25 17 29 490 RTD COFFEE DAIRY/PROTEIN DAIRY/PROTEIN DAIRY/PROTEIN Door 1 Door 2 Door 3 Door 4 Door 5 Door 6 8 DOOR # OF SHELVES CATEGORY Juice/Juice Drinks Dairy/Protein TOTAL SALES % SHARE 8.9% 6.0% 100% 15.6 14.6 5.3 5.0 7.3 2.9 2.0 3.4 56 109 102 37 35 51 20 14 24 392 12 DOOR # OF SHELVES CATEGORY Juice/Juice Drinks Dairy/Protein TOTAL SALES % SHARE 8.9% 6.0% 100% 23.5 21.9 8.0 7.4 10.9 4.3 2.9 5.1 84 164 153 56 52 77 30 20 35 588 36 Category Insights

NOW There s a Functional Beverage PROVEN to Function! Shelve the #1 Fitness Drink Globally Contact your Eby-Brown Representative CELSIUS alone does not produce weight loss in the absence of a healthy diet and moderate exercise. In a 10 week clinical study published in the Journal of International Society of Sports Nutrition, with sedentary men and women, the group who drank one Celsius per day experienced Significantly Better Results. *These statements have not been evaluated by the FDA. This product is not intended to diagnose, treat, cure or prevent any disease.